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New Zealand's film industry is gearing up for a bumper year as the government's sweeter incentives lures foreign projects and boosts domestic productions, according to New Zealand Film Commission chief executive Dave Gibson.

Cabinet Ministers Steven Joyce and Chris Finlayson last year sweetened New Zealand's film scheme, lifting the incentives paid, as part of a move to put the local industry on a stronger footing and insulate it from lulls between blockbusters. That helped lock in 20th Century Fox to greenlight James Cameron's three Avatar movies to be produced in New Zealand, and Gibson says it's re-injected life into industry that had been in a downturn.

"There was this quite quiet period for a couple of years where the industry really was in a lull, then the government increased the incentives, and straightaway you can see a difference," Gibson told BusinessDesk. "I think it has been a pretty close to a perfect result in the short-medium term that we can see. You really couldn't have asked for a better kind of pick up or take up on it.

"I've been in the film business for 35 years," Gibson said. "All I can say is hold onto your hats, because next year is going to be a big one."

Recent screen projects lured by local incentives include Crouching Tiger, Hidden Dragon, Light Between Oceans and television production Thunderbirds and Gibson says more are set to be announced next year.

New Zealand's screen industry has managed to retain a high profile on the success of local film-maker Peter Jackson, who scored high profile projects including The Lord of the Rings, King Kong, and The Hobbit, which were all filmed locally. That's attracted support from successive governments, who typically like to be associated with such projects, and the current administration spent $60 million in the 12 months ended June 30 on screen incentives, according to budget documents.

Jackson, who lobbied hard for the bigger subsidies, has been one of the biggest beneficiaries of past grant schemes, and his latest Hobbit films reaped $153 million in the first four years of production, according to financial statements lodged with the Companies Office.

Government sweeteners have been a contentious issue with New Zealand pressured to improve the lure of shooting big budget blockbusters locally as a weak US dollar ate into Hollywood studios' margins. The intention was also to develop New Zealand's own film scene, shifting it from a service-based industry to one which creates intellectual property and feeds into other sectors, said Gibson.

"What we're trying to do is to see if we can actually build sustainable infrastructure off the back of it and do other things," Gibson said. Joyce "is quite keen for it to lead to some sort of alteration in the way the industry operates, so that the industry over time begins to create more of its own IP and be a little bit more sustaining in its own sort of business models. That's a nice balance that we didn't see before."

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According to Statistics New Zealand, the New Zealand screen industry's revenue dropped 4 per cent in 2013, from a record high in 2012, as decline in production of feature films more than offset gains from local television and movie theatres. The production and post-production sector contracted 12 per cent to $1.46 billion in 2013, with declines in production sales largely attributable to a 17 per cent drop in gross revenue for feature films. That amounts to about 0.9 per cent of the country's gross domestic product.

Under the new scheme, the government combined its Large Budget Screen Production Grant (LBSPG) and Screen Production Incentive Fund (SPIF) into a single scheme called the New Zealand Screen Production Grant. Previous rebates of 15 per cent for the LBSPG and up to 40 per cent for the SPIF will be replaced by two rebates - 20 per cent plus an extra 5 per cent for productions that meet special criteria.

"For the 20 per cent in some degree it is a box ticking economic thing - if they do this, and spend that and employ this number of people - yes they will qualify," Gibson said. "With the 5 per cent it is much more what additional value are they bringing to the economy of New Zealand in some interesting way."

The scheme aims to support New Zealand productions between $15 million and $50 million, with up to 40 per cent in rebates or incentives. Instead of providing those mid-tier productions a grant, the government will take on an equity stake to recoup some of its investment. That might be between 10 per cent and 30 per cent, according to a Cabinet paper released as part of the December announcement.

The Hobbit trilogy is now coming to end, with the final film due for release this December.

As an English speaking population, New Zealand films face competition in their domestic market from international films, Gibson said. Government funding for local films helped ensure kiwis told kiwi stories, but the recent domestic commercial success and international attention of films like What We Do In The Shadows, The Dead Lands and Dark Horse shows local films do have an audience.

"If you don't have a subsidy system like this or an incentives system, then you will not have these films. If there wasn't a combination of the incentives and the discretionary funding from the Film Commission, pretty much there wouldn't be a Dead Lands, there wouldn't be a Dark Horse," Gibson said. "I don't think you can call it a crutch necessarily, it's just oxygen."

Last week, the Commission signed the New Zealand-China Television Co-Production Agreement, the first television co-production agreement China has signed with another country, giving filmmakers access to funding and incentives programmes in each country, with productions regarded as national film and television of each country. It includes a $1 million China Co-Production Production fund for investment in the production of one or more official feature film co-productions with China.

Separately, the National Business Review reported the future of the Ministry of Business, Innovation and Employment-funded Film New Zealand is under scrutiny, with high level talks held in Wellington on Monday. The film marketing agency is isolated from the wider domestic production industry, and has been criticised by the likes of Jackson and John Barnett, chairman of South Pacific Picture over its effectiveness, accountability and transparency, NBR reported.